Fed Holds as Alphabet and Amazon Slide on AI Spending; ECB Pauses, BOJ Signals Hikes

The Fed held rates with two dissents in favour of a hike, while Alphabet and Amazon fell on AI spending concerns. The ECB stayed on hold and the Bank of Japan signalled further hikes.

Maz Vantage ·

Wall Street: AI spending worries hit big tech

Alphabet lost just over $500bn in market value on Thursday, with its shares falling almost 13% to a six-month low, after it said AI summaries in search were affecting advertising revenue. Revenue grew 25% to $127.6bn and Google Cloud revenue rose 103%, but profit fell 25% and free cash flow was negative by more than $9bn, according to the BBC.

Amazon also drew a cool reception. The BBC reports sales growth of 11% to $201bn alongside negative cash flow of $42bn, and the shares fell about 6% in after-hours trading (BBC). MarketWatch says modest AWS results and weak advertising growth disappointed investors, while The Guardian notes high cloud sales but a cautious fourth-quarter sales forecast. Intel was heading for its worst drop in two years as memory-chip prices weighed on PC demand (MarketWatch). Sandisk forecast revenue nearly quintupling and announced a stock split is coming (MarketWatch). Microsoft priced a $25bn senior unsecured notes offering (Nasdaq).

The Fed holds, with two votes to raise

The Federal Open Market Committee kept the federal funds target range at 3-3/4 to 4 percent on 28 October, by a 10-2 vote. Lisa Cook and Beth Hammack preferred a quarter-point increase. The statement describes economic activity as expanding at a strong pace and inflation as elevated (Federal Reserve).

The BBC reports that this followed a rate rise in September, the first in three years. Fed Chair Kevin Warsh declined to say where policy goes at the next meeting on 8-9 December. US GDP grew at an annualised 3.4% in the third quarter, and consumer prices were up 3.7% in the year to September, driven by fuel and energy prices (BBC).

Europe and Japan: ECB on hold, BOJ signals hikes

The European Central Bank left its deposit facility rate at 2.50%, with the main refinancing and marginal lending rates at 2.65% and 2.90%. It said rising energy prices pose upside risks to inflation and downside risks to growth, that financing conditions have tightened, and that it is not pre-committing to a rate path (ECB). The ECB also announced that Christine Lagarde will step down on 7 February 2027 (ECB).

In Asia, Investing.com headlines say the Bank of Japan held rates and signalled near-term hikes (Investing.com), and that Japan's Nikkei fell by as much as 3% as tech stocks tumbled on AI worries (Investing.com). Tokyo Electron reported a 27% jump in second-quarter profit on AI demand and announced a ¥150 bln buyback (Investing.com).

Other market-moving stories

Binance was reportedly hit by a $6.3bn hack suspected to be the largest in history, and analytics firms attributed it to a North Korean hacking unit (BBC). Binance froze billions in funds (The Guardian). On energy, seven tankers carrying 288,000 tonnes of Russian diesel are sailing toward the US, though there is uncertainty over the deal behind them (The Guardian). DoorDash agreed to buy Instacart in a $17bn deal (BBC).

Sources